Economy and Finance

ip journal

Without institutional reform the euro area is threatened with a lost decade

The euro area seems to have weathered the worst of the crises, but longer-term problems now threaten the currency union. Steps must be taken to avoid a decade of stagnant economic growth, even if none of the policymakers involved are eager to discuss them.

ip journal

Bad figures for trade and unemployment and the worrying state of the public finances: France needs reforms to get out of the present economic crisis – and its beleaguered President François Hollande may end up succeeding against the odds, argues Camille Grand. At the same time, the country has to catch up on international markets and grasp the opportunities of globalization – for which France is better equipped than is often assumed.

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From Germany’s hard left to the ordoliberal right of the Bundesbank, Goethe offers something for everyone as Germany grapples to understand the euro crisis debate. But is the man himself a model of Germanic thrift or a warning of Greek profligacy? Could his texts be the key to understanding the tortured German euro crisis response?

As traditional security policy is superseded by economic and energy interests, we must begin to discuss the “economization of security policy” – the implications of which go far beyond the current global financial crisis and its effects on the security policy of the West. One voice inside NATO describes what needs to be done to ensure that this commercialization of security will still allow the friendly member countries of NATO and the EU to avoid 21st century conflicts and to continue to act collectively.

For decades, Germany has been able to afford unique military and fiscal-political restraint. But all that is changing: first, Germany started participating in international military missions, and now with the European Stability Mechanism and the ECB’s growing political role, the swan song is being sung for the old Bundesbank philosophy. Of all possible times, Berlin has chosen this moment of peak economic strength to abdicate its decades-long special position.

China has been fine-tuning its national economic structure to increase its competitiveness in the world economy and take advantage of the immense potential of global industrial production chains. The financial crisis has given China an additional boost: bestowing Beijing with more equal footing in economic governance institutions, offering favorable conditions for further national development, and facilitating China’s efforts to protect and promote its national interests.

With the eurozone in seemingly endless turmoil, some Euroskeptics wonder if the Swiss model of negotiating a series of bilateral treaties with the EU and its members could maximize economic gains while limiting exposure to crises. But for all its advantages, the Swiss model demands a lot of sacrifice. It may also be nearly impossible for any other country to feasibly replicate it.

Berlin remains unwilling to project military force, even alongside allies. But it has become less hesitant to flex its economic muscles, especially in Europe. Traditionally thought of as a “civilian power,” Germany’s foreign policy has become more assertive in pursuit of profits for its firms, even perhaps at the cost of its broader political interests.

How steady is the “liberal leviathan” United States? Will the “American world order” persist? And what distinguishes power and hegemony in the 21st century? Despite Asia’s continuing rise, three notable authors are certain that America will remain the essential world power.

Placing development under the aegis of the new E.U. diplomatic corps could foreshadow an upgrading of E.U. development policy. Yet critics warn that some countries may be rewarded for the right positions on E.U. security concerns while others, more deserving, may end up with less aid. The economic crisis is causing donors to backslide on commitments.

There have been a lot of changes in the Federal Ministry for Economic Cooperation and Development since FDP politician Dirk Niebel took over. Criticized by some for a lack of experience and loyalty to party members, Niebel has also instituted reforms that his predecessor failed to achieve. Niebel talks about Germany’s role in international development.

Poor euro. Not welcome on the block. Greeted in the womb as a soon-to-be-stillborn. Feared to be a deprivation for owners of the “good old national money” it replaced. Caricatured as the “teuro” (cost-inflating euro) despite conspicuously lower inflation in the euro era than in the decades before. Belittled in 2000 to 2002 because of its declining external value (versus the US dollar).

Corporations have learned the difference. And various European nations have learned from their imperial problems in the past. But the super power United States still has this learning curve ahead of it. Takeovers don’t produce the cooperative trust that maximizes productive synergies.

An economic hegemon is a land that is big enough economically and gains enough from an international regime itself, even if no other country contributes. Germany was the nice guy who picked up the EU check. Now it should do the same for the globe.

Europe can become neither a state nor a nation–and it won’t. Hence it cannot be thought of in terms of the nation-state. The path to the unification of Europe leads not through uniformity but rather through acknowledgment of its national particularities. Diversity is the very source of Europe’s potential creativity. The solution to national problems lies only in European interaction.

The main problem of the EU is its unprecedented success. The founding fathers sought above all to eliminate war from a bloody continent. Their project succeeded so well that peace is now taken for granted. The average European is no longer grateful that war has been made unthinkable.

UNCTAD deplores a new “development pessimism” that says it is not development, but integration into the world market, that is the best path to reducing poverty in developing nations. The two are not exclusive.

If one gives Putin the benefit of doubt, this concentration of power in the hands of the president is designed to support his program of economic reforms and the growth of the economy. Whether this can be achieved by authoritarian means and what sort of repercussions this may have for Russian society is quite another matter.